Restructuring and temporary poor utilization affected profitability in Q2

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| Source: Semcon AB
Q2s results were affected by the major project for a German auto manufacturer,
started in 2013 and involving around 100 people, ending during the quarter.
Along with an order stoppage from another customer this has initially meant
poorer utilization rates. Measures have been taken which impacted results with
restructuring charges of SEK 6 million. Sales are however expected to increase
and we expect to see positive growth in the second half of 2014.
Income and result
Second quarter
Operating income rose to SEK 679 million (637), giving organic growth of 4%. The
operating profit amounted to SEK 3 million (31), giving an operating margin of
0.4% (4.9). The quarter contained one less workday than the same time last year.
The major project for a German auto manufacturer, which started in 2013 and
involving around 100 people ended during the quarter. Along with an order
stoppage from another customer this has initially meant poorer utilization
rates, having a negative impact on results. The quarter has also been affected
by restructuring costs of SEK 6 million. Net financial items totalled SEK -2
million (-2), giving a profit before tax of SEK 1 million (29). Tax costs for
the quarter stood at SEK - (-8). The profit after tax was SEK 1 million (21) and
EPS after dilution was SEK 0.04 (1.18).

January-June
Operating income rose by SEK 120 million and amounted to SEK 1,383 million
(1,263), giving organic growth of 7%. Sales growth is mainly from increased
purchase of goods and services in certain projects. The operating profit
amounted to SEK 44 million (66), giving an operating margin of 3.2% (5.2). The
poorer operating profit is attributable to poorer utilization rates during Q2
and one less workday compared with the same period in 2013. Net financial items
totalled SEK -3 million (-3), giving a profit before tax of SEK 41 million (63).
Tax costs for the period stood at SEK -11 million (-16). The profit after tax
was SEK 30 million (46) and EPS after dilution was SEK 1.67 (2.56).

Financial position
The operating cash flow from current activities was SEK -52 million (-14). Cash
flow is seasonally weak in Q1 and Q2 but this year has, apart from poorer
results, also been affected by increased tax and VAT payments by around SEK 30
million. Investments in hardware, licences, office supplies and equipment
amounted to SEK 13 million (11). The Group’s liquid assets amounted to SEK 61
million (70) with additional nonutilized credit of SEK 246 million (293) as at
30 June. Shareholders’ equity amounted to SEK 626 million (592) and the
equity/assets ratio was 48% (46). A shareholder dividend was paid in Q2 of SEK
45 million (36). The Group’s net debt has dropped over the past year by SEK 17
million and now amounts to SEK 109 million (126) and the debt/equity ratio was
0.2 times (0.2) with an interest coverage ratio of 21 times (26).

Staff and organisation
The headcount on 30 June was 3,032 (2,989). The number of employees in active
service was 2,904 (2,871). In the respective business areas the headcount is as
follows: Engineering Services Nordic 1,058 (1,072), Engineering Services Germany
1,082 (1,078), Engineering Services International 357 (300) and Product
Information 535 (539).

Outlook
Customers’ development requirements remain strong with demand expected to
gradually improve. Semcon expects to see positive development in the second half
of 2014.
Semcon is a global company active in the areas of engineering services and
product information. The Group has around 3,000 employees with extensive
experience from many different industries. Semcon develops products, plants and
information solutions along the entire development chain and also provides many
other products and services including quality control, training and methodology
development. Semcon increases customers’ sales and competitive strength by
providing them with innovative and solid engineering solutions. From 2014 the
business will be run in four business areas: Engineering Services Nordic,
Engineering Services Germany, Engineering Services International and Product
Information. The Group had sales of SEK 2.5 billion with activities at more than
45 sites in Sweden, Germany, the UK, Brazil, China, Hungary, India, Spain and
Russia.